Wednesday, February 01, 2012

Amazon Quarterly Results Bring Price Drop, Analyst Deep Thoughts

The NY Times has the standard story on the results, announced yesterday, and the consequent stock price slippage and analyst beard-stroking.

But we should all have expected this. Amazon has been telling everyone -- loudly, with both their actual announcements and their actions -- that they do not intend to reach a position of market power and then increase margins, which is what all of the analysts and outsiders still expect. Instead, Amazon is following a Wal-Mart strategy: relentlessly push for lower costs and lower prices all the time, in all ways.

Amazon is not trying to dominate markets so that they can they reap larger profits; they're trying to dominate markets so that they can then continue on to enter new markets and dominate those as well. They are not Apple; they will never throw off vast quantities of cash. And expecting them to do so will only lead to misery, heartbreak, and bad investment decisions.

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